Thursday, May 24, 2012
Some parts of the country only have enough housing stock to satisfy demand for just over a year while others have enough for the next 10 years.
The latest property report from NCB Stockbrokers says that across the country, it would take just over five-and-a-half years to clear the excess stock. It estimates that while property prices are down an average of 49% from their peak, it still sees those prices as "somewhere between fairly valued and 25% overvalued".
Regarding available properties, the researchers looked at how long the stock would last, assuming standard vacancy rates of either 8% or 6%.
"Figures suggest that it would take between 50 and 68 months to clear the excess stock [nationwide]," they said. "There are, however, dramatic divergences across regions, with the data suggesting that it would take between four and 14 months to clear the excess stock in the Mid-East versus 119 and 139 months in the case of the Border region."
In the Mid-West it would take up to 93 months, in the South-East it would take 65 months, and it would take 106 months in the South-West.
The researchers found property prices are down 49% from the peak, with prices in Dublin down 57% versus 45% for the rest of the country.
"Looking at rental yields and incomes, we see house prices as being somewhere between fairly valued and 25% overvalued. Overall we still expect the national CSO house price index to register a decline of 60% from peak to trough or 20% from current levels.
"In certain parts of the country, Dublin, in particular, and for certain types of accommodation, rental yields are at levels, which would suggest that some parts of the market may have bottomed."
Bearing that in mind, the researchers said households considering whether to rent or buy should opt for the latter.
"We conclude that it is rational to purchase given current rental prices and current house prices. This does not imply that house prices will not fall further and assumes that the household is not changing property for the life of the mortgage."
The researchers do forecast there will be an increase in the number of people entering the property market.
They say the boom and subsequent bust have delayed household formation by firstly pricing people out of the market and secondly scaring them out of the market.
They also pointed out that the natural ageing of the population should increase the number of buyers "as older age groups are more likely to form households than younger generations".